US trade deficit jumps to $US47.7b

12 January 2013 — 7:27am

The US trade deficit unexpectedly widened in November due to a surge in imports, pointing to a sharp slowdown in economic growth during the last three months of 2012.

Still, the trade gap's growth was driven by imports of consumer goods, a potentially positive sign for household spending if the gains in imports were not a one-time rebound following a disruptive storm.

America's trade deficit widened 16 per cent in November to $US48.7 billion, the Commerce Department said on Friday.

Analysts were expecting the deficit to shrink to $US41.3 billion, and the report led a host of economists to trim their estimates of economic growth in the fourth quarter.

"This is not good news for the fourth-quarter GDP growth," said Peter Cardillo, an economist at Rockwell Global Capital in New York.

When a country imports more than it exports, cash is sucked out of its economy, subtracting from gross domestic product.

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JPMorgan cut its forecast for fourth quarter GDP growth to a 0.8 per cent annual rate from 1.5 per cent. The economy grew at an above-trend 3.1 per cent pace in the third quarter.

The trade deficit was the widest since April. Imports surged 3.8 per cent, the biggest gain in eight months.Imports of consumer goods rose by $US4.6 billion, while imports of petroleum products fell by $US870 million.

That might point to firmer consumer demand, which is the main engine of the US economy.

"The good news is the strength in imports is a sign that the US economy is buying imports," said Cary Leahey, an economist at Decision Economics in New York. "Whatever the fourth quarter GDP prints, it will understate the momentum."

At the same time, some of the strength in imports of consumer goods could prove temporary, said Peter Newland, an economist at Barclays. Some US ports closed in late October due to a mammoth storm, which disrupted trade and hit imports that month.

Also, the risk remains that imported goods could languish on businesses' shelves if purchasing managers are misreading consumer demand.

US stock index futures opened lower and the dollar weakened against the euro.

While the Commerce Department does not release seasonally adjusted data for the US trade deficits with countries and regions, the US goods trade gap with China fell 1.7 per cent from October, with a drop in exports outweighing a slighter fall in imports.

Imports surged 4.1 per cent from the European Union, and were up 6.4 per cent from Germany.

Overall, seasonally adjusted exports rose 1 per cent.

The increase was held back by a 1.3 per cent decline in exports to the European Union, which continues to battle a sovereign debt crisis that has sent several of its member countries into recession.

Falling prices

A separate report showed declining prices for US imports and exports in December, a sign of the chill in the global economy that is hurting exporters but giving respite to US drivers stung by high fuel prices.

The Labor Department said import prices fell 0.1 per cent in December, in line with the expectations of economists polled by Reuters.

Prices fell 0.1 per cent for both fuel and non-fuel imports.

That points to a tame inflation environment, which should allow the Federal Reserve to stay on its ultra-easy monetary policy course as it tries to nurse the economy back to health.

Import prices fell 1.5 per cent in the 12 months through December, with prices for fuel down 6.4 per cent over that period and non-fuel prices up just 0.1 per cent.

Export prices also fell in December from November, dragged down by a 0.2 per cent drop in prices for non-agricultural exports. Prices fell for exported capital goods and consumers goods.

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US manufacturers selling their goods abroad appear to have declining power in pricing as the global economy takes a hit from Europe's debt crisis.